Federal-backed Loans And The Hemp Industry

Hemp Plants In Sunlight Arbor Vita8

By Marco Leavitt

The industrial hemp industry continues to mature. This allows it to catch up as a player in the farming industry. Today, resources long available to other farmers, like federal-backed loans, are becoming more accessible.

FSA loans 101

Federally-backed agriculture (FSA) loans are one appealing option for hemp farmers. They’re meant to help farmers who otherwise might not have access to funding from commercial lenders. The program is overseen by the U.S. Department of Agriculture’s Farm Service Agency (FSA).

There are two providers of FSA loans. They can come directly from the agency using government funding. This may be the best option for hemp farmers since hemp is still a controversial investment. The other way to get a federal-backed loan is through commercial lenders where the agency guarantees 95 percent of the loan. The purpose of the program is to provide temporary support to farmers. This gives them time to build up their business. Eventually, they’ll qualify for commercial credit.

Other goals of the loan program include:

  1. Helping farmers begin or expand operations and bring product to market.
  2. Providing opportunities to minority farmers and women.
  3. Promoting alternative farming methods such as hydroponics and freight container farming.

Improved accessibility for loans

While growing hemp became legal in 2018, some farmers still struggle to find financial support. This is because banking institutions and lenders often hesitate to work with those in the hemp industry. It’s a challenge to differentiate between hemp and marijuana, which also faces difficulty qualifying for financial support.

Hemp farmers now have a leg up. Federal and state regulators eliminated much of the red tape that stopped bankers from doing business with the industry. The Federal Reserve, the Federal Deposit Insurance Company, and other state and federal regulators gave ba assured banks that hemp producers deserved the same treatment as other customers.

Earlier this year, the Department of Agriculture issued its own guidance. The April statement declared that the hemp industry should receive treatment as close to equal as possible as that given to other agricultural commodities when it came to FSA loans.

Eligibility for loans

To be eligible for FSA loans, producers must have a proper license to grow hemp. This is subject to specific state or tribal plans. Applicants are also required to show they have the financial ability to repay their loans.

Farmers with cash flow aside from hemp will most likely be the best candidates. Such growers may be able to borrow funds without a specific contract in place to sell the hemp. A demonstrated history of satisfying previous contracts is also helpful.

The department of agriculture also stipulated that:

  1. Lenders and FSA staff must verify acreage.
  2. Farmers will go into default without licensing.
  3. Borrowers cannot transfer their license or loan to another creditor.

The caveat for hemp disposal

In Alabama, hemp must contain at or below 0.3 percent THC by dry weight. Onsite disposal must occur for hemp with THC levels above the legal amount. Hemp farmers have 15 days within the anticipated harvest to get their test done. Even with an FSA loan, If your crop’s THC levels are too high, it’s up to you to cover the cost to dispose of the hemp. The specific language from the Department of Agriculture breaks down coverage. “FSA will not pay for these services for direct loans and FSA will not cover a lender’s advance to the borrower to cover the cost as part of any guaranteed loan loss claim.”

Ensure your loan for hemp stays in place with help from Arbor Vita8

To help maintain your crop, and ensure it does not exceed legal levels of THC, it’s best to start with the right genetics. Hemp strains known for being hardy and producing low amounts of THC can give you the best odds of a successful crop. This allows you to keep your federal-backed loan intact. With a superior expertise in hemp genetics, Arbor Vita8 can help connect you to wholesalers with the right seeds and seedlings. From there, we can partner with you through the whole hemp growing process. From seed-to-sale, we’re here to offer support, services, and resources. Contact us today to learn more.


The Best Hemp Extraction Services in Alabama

Arbor Vita8 offers hemp extraction services that are both cost-effective and efficient. Our advanced facilities manage high-volume extractions with ease. We produce the highest quality CBD and CBG oil and distillates. Let us transform your hemp into the ideal products manufacturers are looking to buy. Contact us today to learn more about our extraction technology and our other seed-to-sale services. 

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